The needs of Iraq's oil sector to continue and expand are not new. But the inability to exact levels of oil flow -- particularly the exports that bring in the tens of billions of dollars a year that support the federal budget -- highlight a troubling lack of transparency for Iraq and occupation powers.
Oil production in the world's third-largest oil reserves averaged nearly 2 million barrels per day since the 2003 invasion. That's nearly half the production of Iran and about 22 percent of Saudi Arabia, the second and first largest oil reserves, respectively.
Iraq's Oil Ministry -- battling the effects of decades of war, Saddam Hussein's mismanagement, U.N. sanctions and the present chaos -- said programs to repair and secure key, but often targeted, infrastructure would pay off. It apparently has, though not as well as has been reported.
The global energy information firm Platts said Tuesday overall production from the Organization of Petroleum Exporting Countries increased in December, compared to November. This report came as President Bush, traveling in the Middle East, pressed the oil cartel to increase production to scale down prices.
Iraq, a founding OPEC member, produced an average 2.3 million bpd in December, according to the Platts report, 100,000 bpd less than November's daily average.
It corrected a Platts report last week citing Iraq Oil Ministry data that pegged Iraq's December production at 2.475 million bpd, an astounding improvement over the nearly 2 million bpd the country has averaged since 2003. The ministry attributed the improvement over the past few months to stepped-up security and repairs on the often-targeted northern pipeline to Turkey.
"Platts' methodology for calculating output differs from that of the Iraqi government," the report said, adding the ministry's data showed the increase "despite a sharp fall in exports from November levels."
The U.N.-appointed audit board for Iraq's oil proceeds, the International Advisory and Monitoring Board, has no new information on Iraq production and exports. The most recent publication on its Web site is dated Jan. 14, 2008, but contains a presentation of only the first half of 2007. Audits for 2006 were submitted seven months into last year.
Both the U.S. and Iraqi governments have been faulted for an inability to track its sole currency earner. A new report by the U.S. Government Accountability Office shows Oil Ministry expenditures on capital projects -- the work that will increase production in the short, medium and long term -- is a minority share of its annual capital project allocation. It added a caveat, as well, one stated in various reports: There are discrepancies between budget data being provided to GAO by various U.S. government agencies and Iraq's government.
Iraq's oil sector lacks a complete metering system, further hampering efforts to track where the oil and money goes -- to refineries, power plants, exports, sent back into the well or lost to leaks, sabotage and smuggling (though the thriving black market mostly deals in fuels, not raw crude).
Iraqi officials have been known to modify production and export numbers, alternately inflating the numbers to boast and deflating to throw off insurgents.
Southern Iraq's oil sector accounts for about 80 percent -- about 1.9 million bpd -- of overall production and more than 90 percent of exports, according to recent historical data and monthly numbers from media and industry and government reports.
According to the U.S. State Department's Jan. 9 Iraq Weekly Status Report, exports averaged 1.85 million bpd in October, dropped to 1.33 million in November, and reached 1.62 million last month. The report estimates exports for the entire year brought in $38.7 billion -- about 94 percent of the federal budget.
The latest Short Term Energy Outlook, published by the Energy Information Administration, the data arm of the U.S. Energy Department, shows Iraq production averaged 2.3 million bpd in December, 2.25 million in November, 2.3 in October and 2.2 in September.
The northern pipeline from Kirkuk's oil fields to a Turkish Mediterranean Sea port has mostly been offline since 2003 as insurgents in the heavily Sunni territory it runs through first have painted the long, crude-filled bulls-eye with bombs.
But new repairs and a security plan, which started at the end of last summer, has resulted in more frequent exports in the north. The Middle East Economic Survey reports a "security unit" guarding the line was fired and a new pipeline from Kirkuk to al-Fatah started.
It's the turnaround, of sorts, of the northern sector that's mostly accounted for the increased numbers in the last quarter of 2007.
Contracts for Kirkuk oil have been more frequent in the latter half of 2007 and this month, with various accounts putting it at 200,000 bpd, when fully operational. The State Oil Marketing Organization predicts 400,000 bpd soon.
But some "sources" inside Iraq's Oil Ministry have said exports have been around the 300,000 bpd mark.
"EIA's assessments of recent Iraqi production levels are based upon reported export levels, as well as pronouncements of production levels," said EIA analyst Erik Kreil. "While reported exports from the south are generally reliable, there is sometimes confusion as to when the northern export pipeline is open, and for how long."
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